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US Foods could mark opening for IPOs

Foodservice distributor US Foods (USFD) rose over 7% in its trading debut on Thursday, marking what could be the realization of a comeback for IPOs.

There have been only 31 IPOs year-to-date, down 54% from last year, according to Renaissance Capital, manager of IPO-focused ETFs.

And while the IPO market has been slow year-to-date, the food distributor could mark an opening, particularly for a group looking for exits: private equity firms.

With interest rates rising, private equity firms are looking to raise equity to refinance variable rate debt and lock in low rates now. Leveraged buyout deals, like US Foods, are ripe for an exit opportunity for its investors.  First Data (FDC) went public in October 2015, pricing 16% below its midpoint of the expected range.

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Albertsons, Univision and Neiman Marcus are all other names in this category that could be waiting to go public.

Meanwhile, some of the most highly valued unicorns--venture-backed tech companies with valuations of $1 billion or higher--have been staying private longer. Some of the most highly valued unicorns--including Uber, Airbnb, Snapchat, Pinterest, and Dropbox--may be pressured to come public eventually, but there have been no signs of anything imminent. Plus, there remains an overhang after the IPO of Square (SQ) in November 2014, which priced 25% below its projected range and at a valuation under its last two private rounds. That said, it performed well in its first day.

And growth companies with profits--including SoulCycle, BATS Global Markets, and Frontier Airlines--remain on deck as well. In this group, Atlassian (TEAM), set a low valuation range for its IPO at the beginning of December, but priced and opened more solidly.

And while a slowdown in IPOs in 2015 was matched with a record year for M&A, deal cadence has slowed some this year, especially in light of the inversion push-back-- which ended the Pfizer (PFE)-Allergan (AGN) tie-up--and an antitrust crackdown, affecting deals like Halliburton (HAL)-Baker Hughes (BHI), Staples (SPLS)-Office Depot (ODP) and even Sysco (SYY)-US Foods last year.

At US Foods, PE backers like KKR and CD&R--which bought at the peak of the market in 2007--have been able to find an exit through the IPO market. And now it will remain to be seen if this opens the tap for more deals to come.